Lawyers ... staying at the forefront of property transactions
Mike Seaborn and Jeff Jones have practised law on northern Vancouver Island for nearly 20 years, and now oversee offices in Port McNeill, Port Hardy and Alert Bay. Almost two years ago, the lawyers enhanced their general practice through expanded legal services in the real estate field. Jones Seaborn is now a "one-stop" service centre for clients wishing to take advantage of solicitor residential property sales - from assisting in marketing and showing a vendor's property, to negotiating purchase contracts, to completing the conveyance. It's brought them closer to their clients and the community.
Elsewhere, another initiative is underway. Dale Janowsky, QC is one of several lawyers who have envisioned a formal network of lawyers across the province to promote their clients' business interests, including the sale and leasing of commercial properties and assets, through a shared database of client interests. It is a vision that has led to creation of the Lawyers Business and Property Network launched this April, joining together 36 lawyers to date, from Kamloops, the Okanagan, the Kootenays, Vancouver Island and the Fraser Valley.
The Benchers have encouraged the involvement of lawyers in the expanded provision of legal services and are committed to keeping the profession updated on current initiatives. The initiatives profiled here show different approaches, yet they share a common thread - they put lawyers at the forefront of property transactions to ensure clients benefit from professional legal guidance, from start to finish.
There are certainly issues for lawyers to watch on the horizon. Following the launch of an expanded legal practice by Jones Seaborn, the Superintendent of Real Estate raised some objections and appears to be construing very narrowly the section of the Real Estate Act that exempts lawyers from registration as real estate agents. The Law Society, however, views a lawyer's representation of clients in these initiatives as constituting the practice of law and in the public interest. For more on the respective positions of the Law Society and the Superintendent, see the sidebar "Are property sales the practice of law?"
In its strategic plan (online at www.lawsociety.bc.ca), the Law Society has recognized that client expectations are driving change in the marketplace, and that lawyers need the flexibility to respond. The Law Society is committed to reviewing its regulatory framework to ensure the rules protect the core values of the profession without unnecessarily hindering innovations by lawyers. The primary value that lawyers bring is professional legal advice, offering greater protection and a more complete service for clients.
B.C. lawyers are finding creative ways to renew their role in real estate and business - guiding more clients through transactions, from beginning to end. Michael Seaborn and Jeff Jones, whose general practice on Northern Vancouver Island now features assistance to vendors with residential property sales, have found their full service firm has struck a chord with clients, and given them a new opportunity.
For people selling a home on northern Vancouver Island, there is an alternative to using a real estate agent or going it alone in a private sale. For almost two years, Jones Seaborn, a two-lawyer practice based in Port McNeill, has offered vendor clients more extensive legal services in the real estate field, from initial listing, to sale to conveyance. It's a service that fits well with their general practice, especially in this small community where there is no resident real estate agent.
Jones Seaborn takes transactions from start to finish for vendors: conducting recent title searches; examining title and advising on encumbrances, mortgages, easements and rights of way; obtaining values from the B.C. Assessment Authority; obtaining appraisals and advising on market value; preparing sale particulars and advertising in local newspapers and on the firm's website; erecting property signage; presenting information packages on the property to potential purchasers; showing the property; reviewing and advising on any purchase offers; negotiating agreements and preparing legal documentation and discharges. The cornerstone of this service, as with all of the firm's work, is professional legal advice.
Mike Seaborn notes that lawyers have always been involved in real estate sales, but usually near the completion of a transaction, when it is more difficult to solve problems that may arise. "We are now involved at an earlier stage in that process than we were previously," he told lawyers at a Law Society workshop last year. "The bumper sticker version is that we do more for less, and offer one-stop shopping."
Jeff Jones sees the services lawyers offer in real property sales transactions as very different from those of realtors who list properties for vendors but then work for purchasers for a split of a commission. "Lawyers act for clients, provide professional services to the client and always have their clients' best interests at heart," he says, noting that his firm makes it very clear to a vendor client and to potential purchasers looking at a property that the firm acts only for the vendor. "We've found that clients are very appreciative of that."
In Jones' experience, clients like having a choice and also look favourably at the contingency fees charged by the firm.
The firm provides its vendor clients with exclusive representation, legal advice and marketing services on a contingency fee basis: typically, for a residential property, 4% of the selling price up to $100,000 and 1% on any amount over $100,000. Jones Seaborn uses a contingency fee agreement that has been reviewed and approved by the Law Society Ethics Committee.
To reach potential purchasers for their clients' properties, the firm relies primarily on its website, property signs, advertising and information packages.
Mr. Seaborn notes that he and his law partner have found a way to offer legal services in the real property field in a way that works for their firm. They are also always willing to talk to lawyers who might wish to offer expanded services in their own conveyancing practices.
For lawyers who might be intimidated by the prospect, Jones says that, compared to a chambers application or a buy-sell agreement, "it's extremely simple." Lawyers can start with one file and don't need any additional systems. Jones Seaborn now helps 10 to 15 vendor clients in offering properties at any given time.
If lawyers hesitate to take up this opportunity, Jones says it may be founded on a misperception that this is similar to the realtor model, when in fact it is very different. "If anything is consistent with our historical legal services, this is," he says. "It's involving title, real estate, title searches, negotiating and assessing value, all of which we do on a regular basis. If there is anything that lawyers can do, this is absolutely on all fours."
Lawyers interested in more information on the Jones Seaborn experience may wish to visit the firm's website at www.island.net/~js-co or contact Mike Seaborn or Jeff Jones.
The Real Estate Act requires the licensing of people falling within the definition of "agent," subject to a limited number of exemptions, including one for lawyers. Section 2(a)(f) of the Act provides:
Following on a complaint from the B.C. Real Estate Association a year ago, the office of the Superintendent of Real Estate questioned whether lawyers can rely on this exemption for solicitor property sales without being licensed under the Real Estate Act.
The Law Society has taken the view that the Real Estate Act and Legal Profession Act do not, with respect to the sale of real estate, define exclusive fields of practice. Rather, they define exclusive fields of regulatory authority. Under the Real Estate Act, the Superintendent of Real Estate has exclusive authority to regulate non-lawyers in real estate sales. The Law Society has exclusive authority under the Legal Profession Act to regulate lawyers in the practice of law.
The Law Society imposes higher standards of education, conduct and accountability on lawyers than are imposed on real estate agents and salespersons and maintains insurance and special fund programs that are better than the security provided to clients of real estate agents. Accordingly, the Law Society has pointed out that requiring lawyers to be licensed under the Real Estate Act would be redundant and would not increase public protection.
An opinion from counsel concluded that, while the exemption would not apply if the lawyer performed no legal services for a client, legal services in connection with a real estate transaction includes negotiating the purchase or sale, including evaluating factors going to the negotiation such as appraisals, development or redevelopment possibilities and financing. In the view of counsel, the wording of the Real Estate Act exemption does not support a limitation - either on the means by which a lawyer obtains a client or the context of the transaction in the lawyer's overall practice of law.
Counsel distinguished a 1995 decision of the New Zealand Court of Appeal. That Court held that New Zealand lawyers could not rely on a similar exemption to operate freestanding property centres in coordination with their practice as lawyers: Real Estate Institute of New Zealand v. Lewis and Callanan CA 242/94 31.8.95. The dividing line acceptable to the Court in that case was between a transaction that was incidental to an existing lawyer-client relationship and one that involved active marketing of property where it could be said that the primary service was selling property rather than negotiating and conveying property. In that case, for example, the clients were not required to use the lawyers for the actual conveyancing. That is not the model of service that has been offered by B.C. lawyers.
Despite that fact, the Superintendent of Real Estate is pursuing the issue further and has advised the Law Society that, rather than seek a court determination of the scope of the exemption for lawyers, he would seek a legislative amendment to remove the exemption. Law Society representatives met with the Minister of Finance in March to oppose any amendment that would preclude lawyers from engaging in this field of practice, noting that there has been no harm to the public in all the years the exemption has been in place, nor have there been public complaints or demand for legislative change.
The Lawyers Business and Property Network . making connections
A new initiative underway in April is the Lawyers Business and Property Network. The Network is a non-profit association, open to all B.C. lawyers, that helps lawyers assist clients - both buyers and sellers - with business, property and financial interests, including the purchase, sale and financing of commercial properties and businesses.
Now with 36 founding members, the Network is a forum for lawyers to pool their collective client and business contacts, to further client interests. As President and a primary organizer of the Network, Dale Janowsky, QC of Kamloops, says that cooperative efforts in the profession are important.
Mr. Janowsky sees great potential for lawyers, through the Network, to tap into a pool of contacts. "You can pick up the lawyers directory, multiply the number of lawyers by the number of clients they may have," he said. "When we share information among the members in an organized and professional manner, it's just head and shoulders above whatever is being offered out there."
The Network is intended to help lawyers represent clients throughout business and property transactions, and to receive fees commensurate with the value of their services. As noted by Mr. Janowsky, clients regularly pay real estate agents commissions of between 4% and 7%, while lawyers currently receive conveyancing fees worth the one-tenth the value of those commissions.
He sees great potential in a network providing opportunities to lawyers and giving clients greater choice. "The program will support the public interest by providing a one-stop service for clients of lawyers who want market exposure for their business or property in addition to legal advice on the purchase or sale," he says.
A client has several advantages in choosing a lawyer, including the promise of strict confidentiality, which can be critical in commercial transactions. "Some clients don't want it known that their business is for sale because someone may try to take it away from them," notes Mr. Janowsky. "If you have, for example, a client list that is an integral part of the business, you can provide it to the other lawyer on the basis that he does not disclose it to anyone, and the financial records that go along with that. Our rules of conduct and ethics (as lawyers) are so much stronger and onerous than in the real estate world, and that's why we provide a better service."
The Lawyers Business and Property Network will feature several key services:
The Lawyers Business and Property Network offers members fee agreement templates (either a fixed fee or contingency basis) when representing buyers or sellers. Fee negotiations and arrangements are left entirely to the individual lawyer and client.
What professional conduct considerations have been canvassed in relation to the template agreements? The Law Society Ethics Committee reviewed certain aspects of the agreements for the Network last December, specifically in relation to lawyers charging placement fees to buyers and accepting finders' fees for financing. The Committee was satisfied that the agreements would not violate Chapter 6, Rule 8 of the Professional Conduct Handbook (Finders' fees), given that all finders' fees and brokerage fees are disclosed to and approved by a client, and paid to the client's credit. In the Committee's view, a buyer's agreement could properly allow for the buyer to pay a fee to his or her lawyer based on a percentage of the purchase price without violating Chapter 7, Rule 1 of the Handbook (Acting when the lawyer has an interest in the matter) as a lawyer is always under an obligation to minimize costs for a client.
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Mr. Janowsky invites all lawyers to visit the Lawyers Business and Property Network information site (www.thenetwork.ca). To register for access to the private intranet, first register at the Juricert website (www.juricert.ca), click on "Products and Services" and submit a request to apply to the Network. Once your Law Society membership has been confirmed by Juricert, the Law Society's online authentication service, you will be given a password to www.lbpn.intranets.com.
If a lawyer wishes to do more than browse the intranet - to post a listing or conclude a transaction for a client - he or she can do so by joining the Network, paying the annual fee and any applicable posting or transaction fees. The annual membership fee is $250.
For more information, you can also contact Mr. Janowsky by email at email@example.com, by telephone at (250) 372-2022 or by fax at (250) 372-0087.
The coverage provided by the Law Society's mandatory liability insurance policy includes coverage for errors made by lawyers in acting for buyers and sellers in the purchase and sale of property and goods. As always, the extent of any coverage under the policy depends, in part, on the exact nature of the activities undertaken.
The Lawyers Insurance Fund has already provided some assurances to the members of the Lawyers Business and Property Network on coverage under the policy for the services described in the Network's retainer agreements. Other lawyers considering embarking on their own property initiatives are encouraged to contact the Lawyers Insurance Fund directly for an "advance ruling." The ruling will confirm whether the specific activities in which the lawyer intends to engage fall within coverage, and will provide information on limitations, if any, on coverage.
If it is ultimately determined that lawyers are precluded from engaging in these activities without separate licensing, such as a licence under the Real Estate Act (see Are property sales the practice of law? on page 5), any services for which lawyers are required to be licensed would no longer fall within coverage.
The Lawyers Insurance Fund reminds lawyers that this area of practice, as with any others, poses potential liability risks for lawyers. The highest risk faced by lawyers is the exposure to claims for negligent misrepresentation. As soon as one side to the transaction, usually the purchaser, alleges that misinformation was given to them about a matter of particular importance, lawyers will quickly find themselves embroiled in the dispute.
Like all risks, the risk of liability for misrepresentation can, with careful practice and management, be minimized. For instance, when appropriate, lawyers will want to clearly communicate to the parties that the lawyers are not responsible for the accuracy of specific information. Further, when a lawyer does provide information about the property, that information should be confirmed in writing, along with any appropriate disclaimers or warnings.
For more information on any of these matters, please contact Margrett George at the Lawyers Insurance Fund by telephone at (604) 443-5761 or by e-mail at firstname.lastname@example.org.